case studies Flashcards
Unit 1 case study - Triodos bank
- Global pioneer using the power of finance to support projects benefiting people and the planet
- Values people, planet and profit and takes into account in its strategy, structure, lending and culture
- 1980 - founded and overseen by a supervisory board with its shares administered by a separate foundation
- Only lends to organisations that create social, environmental and cultural value like charities, social businesses, community projects and environmental initiatives
- 50% of loans are in environmental sector
- Financing 381 projects by the end of 2016
- Generating a capacity of 2400 MW of energy
Financed 33000 hectares of organic farmland and 28000 hectares of nature and conservation land
Unit 1 case study - WorldPay
founded 1997, couldnt work without natwest expertise, idea when online stores didnt have different currencies, 126 currencies over 146 countries, over 31 million transactions a day
Unit 1 case study - Facebook
- 2018 - Mark Zuckerberg - wanted to explore and understand cryptocurrency and blockchain technology
- June 2019 - Libra association - a new cryptocurrency that has backing of some of the largest companies meaning it could be accepted anywhere traditional payment cards are used
- Their aim is to serve the 1.7billion adults who don’t have access to traditional financial services to facilitate the ‘unbanked’
- Hoped to become a global currency that could rival the US dollar
- Questions were raised as it had the potential to disrupt the entire financial industry
- G7 (group of 7) - was set up to assess the risks and a statement was issued by data protection officials which they raised concerns, set out privacy expectations and urged data protection policy information.
- United states lawmakers portrayed libra as a threat to users privacy, the banking system and national security
- Concerns that libra could raise the risk of money laundering
- September 2019 - libra association seeking to apply for licensing as a payment system in Switzerland
- Reports being produced for G7 finance ministers in October but no update as of yet.
Unit 1 case study - peer to peer lenders (p2p)
- Enables lenders and borrowers to deal with each other without using a bank
- Put investors who have money they want to lend in touch with borrowers and arrange and manage the loans who both pay the p2p provider a fee for the service
- Lenders place money with a peer to peer online platform to then be lent to lots of different borrowers as many small loans
- Borrowers can borrow small amounts from many different lenders and the platform collects the repayments of interest and capital from each borrow to pass back to the lenders
- Lenders run a higher risk of losing their money and borrowers have to select and bid for a loan which requires more work and financial capability
December 2018 - Zopa granted a banking licence becoming the first p2p group to compete with mainstream banks
Unit 2 case study - cashless festivals
2012-2019 saw 2145 high street branches in the UK closing, 17% still visit a branch mainly old/retired, many don’t like online technology and prefer to use cash, affect vulnerable customers
Unit 2 case study - central bank digital currency
- 2019 - the international monetary fraud reported several banks are exploring the issue of introducing central bank digital currency (CBDC).
- Research published on implications on financial stability, structure of banking sector, entry of non-bank financial institutions and monetary policy transmission.
- For some, the falling use of cash is motivating the study as an alternative, robust and convenient payment method.
- It can reduce the chances of a few large providers dominating the system.
- In developing countries, more focus on improving operational and cost efficiency.
Unit 2 case study - idea bank
- Poland - digital banking champion in Europe, middle-east and Africa
- Idea bank - well known for entrepreneurs showing 60% didn’t have a regular office space
- Idea hub - free co-working spaces designed for entrepreneurs to meet and hold business meetings
- Idea hub express - involved branches and co-working spaces on commuter trains
The idea bank carriage feature desks, conference spaces, office supplies, Wi-Fi and coffee with priority to idea bank customers
Unit 2 case study - PayPal
Market capitalisation - $139 billion, 9.9 bill transactions, global payment platform allowing anyone with an email to receive and send payments, guarantees a refund if an item purchased online doesn’t arrive or isn’t as described
Unit 2 case study - street performers
- China - individuals and businesses use mobile and online payments with the central bank having to announce a crackdown against businesses refusing to accept cash.
- Its regarded as the most advanced for mobile payments in the world with some cities close to becoming cashless.
A QR code is scanned ready to make the payment.
- Its regarded as the most advanced for mobile payments in the world with some cities close to becoming cashless.
Unit 2 case study - Sweden
- Mainly use debit cards or their new payment mobile app ‘swish’.
- Sweden’s central bank estimates 20-50% decline in use of cash
Unit 2 case study - Sweden
- Mainly use debit cards or their new payment mobile app ‘swish’.
- Sweden’s central bank estimates 20-50% decline in use of cash
Unit 3 case study - CBI code of conduct and responsible lending
- Treating all customers and colleagues with respect and acting with integrity.
- Developing and maintaining professional knowledge, acting with skill, care and diligence considering the risks and implications of my actions and advice.
- Being open and cooperative with regulators complying with legal requirements.
- Paying interest to customers and treating them fairly.
- Observing and demonstrating standards of market conduct at all times.
- Adding an honest and trustworthy manner.
Treating information with confidentiality and sensitivity.
Interest
The charge for a loan. Fixed (interest rates same or an amount of time), variable (vary in relation to a benchmark)
Capped interest - although can fluctuate subject to an interest cap
Simple interest - there’s no compounding of interest, determined by multiplying the principal by the rate by the time period.
Compound interest - interest on principle amount plus whatever interests already occurred
Interest rates
Standard variable rate (SVR) - standard rate of interest lenders use, rate borrowers are automatically switched to after fixed terms ended
Annual equivalent rate (AER) - for savings and current accounts in credit and effective annual rate (EAR) - for borrowing and overdrafts both are annualised rates of interest
Annual percentage rate (APR) - annualised interest rate including effects of both compounding interest and other non-interest charges
Standards of lending practice
Vision is to ensure personal and small business borrowers receive a fair deal from their lender and covers loans, credit cards, charge cards and overdrafts and for business customers commercial mortgages are covered too
Standards for personal customers: financial promotions and communications, product sale, account maintenance and servicing, money management, financial difficulty, consumer vulnerability
Standards for business customers: product information, product sale, declined applications, product execution, credit monitoring, financial difficulty, portfolio management, vulnerability
Borrowing and lending proposition (CAMPARI)
Character - borrowers integrity, credit history and background.
Ability - managerial and technical competence of a business owner
Means - establishing the borrowers means, looking at their assets and liabilities
Purpose - it must be legal, ethical, relevant and in line with the bank’s lending policy, it also helps establish the level of risk involved
Amount - may not accurately calculate how they need. Too little (not sufficient for purpose), too much (could affect their ability to repay)
Repayment - main sources (income, sale of an asset)
Insurance - security provides a secondary source of repayment in the event the primary source unexpectedly fails
Borrowing and lending proposition (ICE)
Interest - bank considers what rate to charge on loan to compensate for risk involved
Commission and fees - commission compensates the bank for administrative work involved in granting and monitoring the loan
Extras - any relevant products that could be offered to the customer like life insurance or payment protection
Credit score
Information held by credit reference agencies (our presence on electoral register, county court judgments made against us, bankruptcies, past and current credit agreements)
Credit score - number based on statistical analysis of current and past credit history. The higher the score the less risky a borrower
Fico score - calculated using payment history, amounts owed, length of credit history, new credit, credit mix.
Payment history - whether the borrower has paid past credit accounts on time (most important factor)
Amounts owed - if a person’s using a lot of available credit may indicate they’re overextended
Length of credit history - longer credit history will increase score
New credit - opening several credit accounts in a short amount of time represents a greater risk
Credit mix - takes into account all a person’s borrowing
Security for lending
Assets such as land, properties built on land, life assurance policies, stocks and shares
Guarantee - promise made to assume debt obligation of a borrower if they fail to pay what is due
MAST test - marketability (how easy it is to sell the asset) ascertain ability of value (how easy it is to value correctly) simplicity of title (how easily ownership can be proved) transferability of title (how easy for bank to gain ownership so it can sell the asset)
Responsible lending
Benefits to society - drives economic growth, leads to more efficient allocation and utilisation of resources, stimulates higher levels of saving, makes money available for socially and environmentally sustainable economic activities, makes funds available at low cost to disadvantaged sections of society
Detrimental effects - irresponsible lending can encourage irresponsible borrowing meaning effects customer and the bank also loses out when loans are not repaid
Unit 3 case study - CBI code of conduct and responsible lending
Unit 4 case study - TSB bank
- April 2019 TSB was faced with technical issues after attempting to move to a new IT system.
- Thousands of customers couldn’t access their accounts with many reporting they could also access others details.
- Promoted a parliamentary enquiry with the banks chief resigning and a total cost of £330 million for the bank.
- 80000 customers switched their banks with the bank losing approximately £105.4million in 2018.
£125million spent on customer payouts, £49million in fraud£122million for the cost of fixing the systems and £34m in lost income.
Interest
The charge for a loan. Fixed (interest rates same or an amount of time), variable (vary in relation to a benchmark)
Capped interest - although can fluctuate subject to an interest cap
Simple interest - there’s no compounding of interest, determined by multiplying the principal by the rate by the time period.
Compound interest - interest on principle amount plus whatever interests already occurred
Interest rates
Standard variable rate (SVR) - standard rate of interest lenders use, rate borrowers are automatically switched to after fixed terms ended
Annual equivalent rate (AER) - for savings and current accounts in credit and effective annual rate (EAR) - for borrowing and overdrafts both are annualised rates of interest
Annual percentage rate (APR) - annualised interest rate including effects of both compounding interest and other non-interest charges
Standards of lending practice
Vision is to ensure personal and small business borrowers receive a fair deal from their lender and covers loans, credit cards, charge cards and overdrafts and for business customers commercial mortgages are covered too
Standards for personal customers: financial promotions and communications, product sale, account maintenance and servicing, money management, financial difficulty, consumer vulnerability
Standards for business customers: product information, product sale, declined applications, product execution, credit monitoring, financial difficulty, portfolio management, vulnerability
Borrowing and lending proposition (CAMPARI)
Character - borrowers integrity, credit history and background.
Ability - managerial and technical competence of a business owner
Means - establishing the borrowers means, looking at their assets and liabilities
Purpose - it must be legal, ethical, relevant and in line with the bank’s lending policy, it also helps establish the level of risk involved
Amount - may not accurately calculate how they need. Too little (not sufficient for purpose), too much (could affect their ability to repay)
Repayment - main sources (income, sale of an asset)
Insurance - security provides a secondary source of repayment in the event the primary source unexpectedly fails
Borrowing and lending proposition (ICE)
Interest - bank considers what rate to charge on loan to compensate for risk involved
Commission and fees - commission compensates the bank for administrative work involved in granting and monitoring the loan
Extras - any relevant products that could be offered to the customer like life insurance or payment protection
Credit score
Information held by credit reference agencies (our presence on electoral register, county court judgments made against us, bankruptcies, past and current credit agreements)
Credit score - number based on statistical analysis of current and past credit history. The higher the score the less risky a borrower
Fico score - calculated using payment history, amounts owed, length of credit history, new credit, credit mix.
Payment history - whether the borrower has paid past credit accounts on time (most important factor)
Amounts owed - if a person’s using a lot of available credit may indicate they’re overextended
Length of credit history - longer credit history will increase score
New credit - opening several credit accounts in a short amount of time represents a greater risk
Credit mix - takes into account all a person’s borrowing
Security for lending
Assets such as land, properties built on land, life assurance policies, stocks and shares
Guarantee - promise made to assume debt obligation of a borrower if they fail to pay what is due
MAST test - marketability (how easy it is to sell the asset) ascertain ability of value (how easy it is to value correctly) simplicity of title (how easily ownership can be proved) transferability of title (how easy for bank to gain ownership so it can sell the asset)
Responsible lending
Benefits to society - drives economic growth, leads to more efficient allocation and utilisation of resources, stimulates higher levels of saving, makes money available for socially and environmentally sustainable economic activities, makes funds available at low cost to disadvantaged sections of society
Detrimental effects - irresponsible lending can encourage irresponsible borrowing meaning effects customer and the bank also loses out when loans are not repaid
Unit 3 case study - CBI code of conduct and responsible lending